In the wake of Hurricanes Harvey, Irma, and Maria, I have visited the homes of many flood survivors. This year I can be more confident than ever that the National Flood Insurance Program (NFIP) will be there to pay their claims.
November 30 marked the end of the 2017 hurricane season, the second largest claims year in the NFIP’s history. As of November 30, more than 122,000 survivors have filed claims for the recent floods, and FEMA has paid over $6.687 billion in flood insurance claims related to Hurricanes Harvey and Irma.
Before the storms of 2017 were even developing, we took a measured step to protect against the large and uncertain costs of extreme flooding events. In January 2017, FEMA purchased reinsurance from the private reinsurance markets. This risk transfer mechanism is commonly used by private insurance companies and public entities to protect from large financial losses.
By securing reinsurance for the NFIP, we diversified the tools we use to manage catastrophic flood risk. Under the 2017 Reinsurance Agreement, FEMA transferred $1.042 billion in flood risk above a $4 billion retention to 25 reinsurance companies. On November 6, 2017, FEMA surpassed its retention for claims paid to insured flood survivors of Hurricane Harvey.
This week, we will begin collecting reinsurance recoveries from the private markets under the 2017 agreement, recovering up to $1.042 billion. In other words, the private reinsurance markets will help Hurricane Harvey survivors by sharing a portion of the costs of flood insurance claims.
Catastrophic events like Hurricanes Harvey, Irma, and Maria will continue to occur, and the costs associated with extreme events exceed what the NFIP can manage alone. The unprecedented 2017 hurricane season has demonstrated that reinsurance is an important tool in sharing risk with the private sector. Currently, we are in the process of securing reinsurance for 2018.
The timing of the 2018 reinsurance renewal coincides with the need for renewal of the NFIP. Since the National Flood Insurance Act (NFIA) was enacted in 1968, Congress has amended the NFIA to enable FEMA to continue selling flood insurance, which is referred to as the NFIP Reauthorization.
The NFIP is currently authorized through December 8. We are working closely with Congress to ensure that the program does not lapse, and that it is reauthorized with a plan for strengthening the NFIP’s financial footing. As we continue to build out our multi-year reinsurance strategy with a January 2018 reinsurance placement, we look forward to incorporating reauthorization reforms that build a stronger NFIP for tomorrow.
For more information, read “Increasing Flood Insurance Resilience – The Role of Reinsurance.”
Additional information on the NFIP Reinsurance Program is available in these frequently asked questions.